GST may make services costlier

In contrast, on the goods side, food products and furniture, among other manufactured products, may see a fall in prices, if retailers pass on the benefit to consumers.TNN | December 05, 2015, 08:55 IST

In contrast, on the goods side, food products and furniture, among other manufactured products, may see a fall in prices, if retailers pass on the benefit to consumers.NEW DELHI: The recommendations of the panel headed by chief economic adviser Arvind Subramanian on GST rates have triggered concerns that services, ranging from mobiles to entertainment, could become more expensive but the committee is confident that its proposals would have minimal inflationary impact.

In contrast, on the goods side, food products and furniture, among other manufactured products, may see a fall in prices, if retailers pass on the benefit to consumers.

"The suggested standard rate of GST of around 17-18% appears to be a modest rate for manufacturers who currently suffer the levy of central excise duty at 12.5% as well as state levies, which may be as high as 14.5-15%," said Saloni Roy, senior director, Deloitte in India.

"However, at this rate, services are likely to become more expensive, as the difference between the current rate of service tax and suggested rate of GST is significant. However, this impact can be mitigated to some extent, depending upon tax credits available to the service provider under GST regime," said Roy.

The panel has suggested a revenue neutral rate of 15-15.5%. It has said that lower rate should be kept around 12% and the maximum possible rate should be taxed at the standard rate. Services tax rate is 14% and with the Swachh Bharat cess it comes to 14.5%.

There will be a slight impact on services but the effective cost of goods would come down, said Rajeev Dimri, indirect tax practice, consulting firm BMR.

The panel said the impact would not be significant. "Analysis in the report suggests that the proposed structure of rates will have minimal impact on inflationary consequences.

But, careful monitoring and review will be necessary to ensure that implementation of GST does not create conditions for anti-competitive behaviour," it said.

Economists have for long argued that the implementation of GST will help do away with the cascading effect of various taxes and actually help reduce the overall levies. With the entire value chain in the tax net, the government is looking at a wider tax base to trigger buoyancy in its collections.

Sachin Bansal, Binny Bansal, sales director Hari, accounts managers Sumit Anand and Sharauque among other employees have been named in the FIR registered on the basis of a complaint lodged by Naveen Kumar, owner of Indiranagar-based C-Store Company.